Reading Les Echos today makes me rise this question… The French Government implemented a system of tax/subsidy (bonus-malus écologique aka écopastille), that is applied to new cars’ buyers: the system is quite simple, if people buy a car that has a low gas consumption and thus low emissions, the buyer gets a refund/subsidy and if they buy a gas guzzler, they have to pay a tax over the car price (see the chart below for more details).

However it seems like this measure implemented by the new Government early 2008, following the decisions taken during the Environmental Roundtable, may cost around €200 million to the French State in 2008. The reason is that more people are buying more smaller cars than large ones or SUVs, since petrol prices are going up and the tax does not match the subsidies distributed. The Government initially anticipated the system to be self-funded… For the first five months in 2008, small-low-polluting cars sales increased 15% whereas large-engine-gas-guzzzling ones fell 27%, according to the French Carmakers Committee.

Amount of environmental tax/subsidy per grams of CO2 emitted per kilometer

Environmental Tax/Subsidy - Bonus-Malus écologique

Source: Transport Expertise/Ministère de l’Ecologie

A phenomenon that might be temporary

It might be alarming that the system is not financially sustainable but the Ministry of Finance said this phenomenon might only be temporary. Since car buyers anticipated the new law, many people bought their large saloon cars and SUVs before the law to be applicable, in December 2007.

Analysts said the demand for this kind of vehicle will catch up with 2007 figures and that the tax/subsidy system might even though be financially balanced.

Also, Eric Woerth, Minister of the Budget at the Ministry of Finance announced that a new measure could be adopted in 2009, strenghtening the allocation of the subsidy. According to him, tax does not necessarily mean subsidy on the other side, and the tax could even be higher that it is today.

Is this a sign of environmental consideration from the consumers’ side?

This can be seen as a failure… €200 million out of the State’s budget is a large amount of money when considered the economic situation. However, it should be seen as a real step toward environmental protection. If people continue to buy cars but change their habit and buy smaller and more environmentally friendly cars, I would definitely consider this a real progress: the measure, and the €200 million spent (and not wasted!) should then be considered as a successful move of the French Government.

References

  • Article: Le bonus-malus auto coûtera 200 millions à l’Etat en 2008, Les Echos, Jun. 19, 2008: here
  • Website: Qu’est-ce que le bonus/malus écologique (écopastille) ?, Premier Ministre, Dec. 5, 2007: here
  • Website: Emissions de CO2 par type de carburant, Ademe: here
  • Article: Bonus, malus et “superbonus” pour les achats de voitures en France, Notre Planète, Dec. 6, 2007: here